US employers face multiple challenges when it comes to filling jobs and retaining workers, including a shortage of skilled labor and an aging workforce. To meet the moment in this era of technological change, some companies are broadening their hiring lens beyond the traditional college résumé. They are evaluating candidates on their capacity to learn, their intrinsic capabilities, and their transferable skills.
This is where military veterans can make a difference. Veterans represent a source of labor potential that is untapped relative to the breadth of experience and depth of skills that they acquire and develop during their service. Members of the military receive technical training, operate under pressure in austere environments, and develop strong interpersonal skills throughout their service, making them well qualified for numerous civilian occupations. While not every military role is directly transferrable to a civilian job, most skills are—including those that correspond to US industries experiencing labor shortages, such as infrastructure and manufacturing.
And veterans aren’t the only ones who stand to benefit from a longer look by employers: the economic opportunity of unleashing the value of veterans’ work experience through skills-based hiring could reach almost $15 billion over a ten-year period, new McKinsey research shows.
In this article, we explore the complex employment picture for military veterans, including in jobs and industries that will be most affected by automation and generative AI. We look at actions the military can take to help service members prepare for their transition to civilian work. We focus particularly on enlisted veterans, who make up the majority of those shifting out each year but who tend to fare worse in the labor market because employers don’t recognize their technical skills. We then discuss ways that the military and the private sector can close the veteran opportunity gap by improving employment outcomes.
The veteran employment landscape
Military veterans are not a homogeneous demographic, nor is their labor profile. Veterans’ work experiences differ by age, skills, and educational degrees. Our research shows that, in the aggregate, veterans with bachelor’s degrees and those skilled through alternate routes (known as STARs1) outearn their nonveteran peers (Exhibit 1).
Veteran STARs are, on average, eight years older and earn $3.91 more per hour than civilian STARs, though they tend to cluster in fewer, technical occupations. The largest veteran STAR group is aged 45 to 54; this cohort has the highest median hourly wage ($26.44) of all STAR groups. The group with the highest median hourly wage overall ($42.58) is made up of veterans aged 55 to 64 and with a bachelor’s degree or higher.
The roles with the highest representation of veterans are often analogs of military specialties. These roles include aircraft pilots, flight engineers, and aircraft mechanics and service technicians, as well as detectives and criminal investigators. Veterans are also well-represented in middle- to high-wage occupations that are accessible from low-wage jobs and rarely require an undergraduate degree. These roles include occupational-health and safety specialists and technicians, crane and tower operators, paramedics, and construction and building inspectors.
When viewed as a monolith, veterans are doing relatively well. But when broken down into subsets, many veterans are struggling to find jobs that use, recognize, and compensate them commensurate with their level of military experience. This is especially true for those who have difficulty translating their experience to civilian employment opportunities—in particular, veterans without a four-year degree, who represent 61 percent of all employed veterans.2
Of the roughly 150,000 active-duty service members who transition from the military each year,3 approximately 90,500 earn less in their first year after being discharged than they did on active duty, resulting in billions of dollars of lost economic value (Exhibit 2).4 And while some categories of veterans fare better than others—including former officers, as well as Special Forces and personnel who specialized in intelligence, IT, and cyber operations—veterans across categories are, on average, entering the civilian workforce at lower median wages than they had in the military.
Enlisted service members are disproportionately affected: veteran STARs tend to occupy lower-paying and more physically demanding roles than veterans with bachelor’s degrees, indicating that they may be hampered by not having a four-year degree.
McKinsey analyzed what the total potential loss of annual earnings for a cohort of 90,500 transitioning enlisted service members would mean in terms of lost overall economic potential (Exhibit 3). The research, which combined labor data and a skills-based analysis, found that the economic potential of improving employment outcomes for a single cohort of transitioning veterans could be almost $15 billion over a ten-year period (see sidebar, “Our methodology”). This presents a significant opportunity for the military, the private sector, and not-for-profit organizations supporting veterans as employers seek workers with ready-made skills.
How veterans’ skills apply to jobs—now and in the future
In the broad economic context, McKinsey research on the US labor market shows a disconnect between available jobs and people qualified to fill them. Two industries in particular stand out: infrastructure and manufacturing.
The Bipartisan Infrastructure Law (BIL) is expected to create hundreds of thousands of additional jobs on projects ranging from roads, bridges, and waterways to clean energy and electric vehicles. However, a labor crunch in construction jobs exists across sectors, occupations, and geographies. In manufacturing, McKinsey analysis suggests that reviving the industry—in which the bulk of employees don’t need four-year degrees—could boost GDP and add up to 1.5 million jobs.5
Veterans map well to these high-demand jobs. To identify the specific actions that can help improve veterans’ employment outcomes in these industries and others, the research matched military specialties and skills to their full spectrum of civilian occupations. The goal was to identify high-potential pathways that are likely to improve veterans’ livelihoods based on skill overlap.6
The analysis found that enlisted veterans are highly rated on occupational skills associated with trades such as electricians, mechanics, and construction professionals. For example, veterans were consistently rated higher on technical skills such as installation, equipment maintenance, repairing, and troubleshooting than the threshold required for the average civilian occupation.
Conversely, enlisted veterans were rated lower on “softer” occupational skills associated with management, sales, and office and administrative-support roles, such as reading comprehension, persuasion, and negotiation, suggesting real or perceived deficiencies in interpersonal skills that are required to succeed in business environments. However, these lower ratings tended to improve with military rank and the accompanying experience that rank brings, as both midlevel and senior noncommissioned officers (NCOs) scored above average on all occupational skills.7
Veterans overall score higher on service orientation, which the analysis defined as “actively looking for ways to help other people,” than the threshold for the average civilian occupation. However, this skill may not fully capture inherent veteran strengths, such as dependability, punctuality, discipline, and integrity.
While the typical veteran tool kit favors technical ability over verbal and written communication, veterans can consider developing and refining their soft skills to allow for better access to high-potential “gateway” roles, while continuing to pursue in-demand occupations that require technical skills.8 These roles create a bridge between frontline work and destination roles, which require higher-level skills training and academic credentials.
The top 15 occupations that employ veterans today are generally expected to experience strong positive labor demand change and low change-of-work activities in the coming years as digitization and other technological changes take hold (Exhibit 4). These occupations include nursing (expected to experience a 41 percent increase in labor demand); laborers and freight, stock, and material movers (a 26 percent increase); construction laborers (a 22 percent increase); and truck drivers (a 12 percent increase). Veterans can continue to pursue these occupations at even higher rates.
On the other hand, certain occupations that employ veterans are at risk of displacement due to declining job demand and adoption of automation, as well as the acceleration of generative AI in these occupations. This includes retail salespeople (expected to experience a 23 percent decrease in labor demand), supervisors of office and administrative-support workers (a 20 percent decrease), and customer service representatives (a 14 percent decrease).
Transitioning veterans can consider avoiding these roles, and veterans already in these occupations can continue to focus on upskilling, while taking advantage of reskilling opportunities to move into more secure occupations. Veterans looking to move into more senior positions can also use generative AI tools to their own advantage to help boost their capabilities and output.
Veterans looking to move into more senior positions can use generative AI tools to their own advantage to help boost their capabilities and output.
Several gateway occupations offer high potential to improve veterans’ livelihoods, including heating, ventilation, and air-conditioning (HVAC) mechanics and installers, human resources specialists, and industrial-machinery mechanics. However, these occupations are being accessed by less than 2 percent of employed veterans today (Exhibit 5).
Closing the opportunity gap: Actions stakeholders can take
We’ve looked at the skills that many veterans offer and the potential roles that a majority of veterans pursue, including gateway jobs for those without four-year degrees. To carve out better pathways and help make transitions more successful for those who need more support, the military services and employers can consider the following interventions.
The military: Recruit, retain, retrain
The military can address three recruiting and retention challenges by communicating the value of service and how skills developed in the military can translate to future careers.
Reverse declining interest in military service. The US military itself is facing a recruiting crisis that is likely to worsen if the value proposition of employment beyond military service doesn’t improve.9 The general population is largely unaware of the benefits of service, with 50 percent of young people saying they know little to nothing about military service and its unique professional-development offerings.10
To shift perceptions and to help support candidates on their holistic career journey, the military can train recruiters to promote how service-developed skills can lead to well-compensated civilian careers and improved livelihoods, including how different military specialties map to various civilian occupations. As discussed earlier, there are several high-potential career pathways that are open to veterans that will continue be viable even as AI adoption increases. Recruiters who can communicate the value of military service in the context of these pathways could improve interest levels over the longer term.
The US Department of Defense (DOD) and service branches can launch a public relations campaign that highlights how the military develops desirable skills during service and provides support, education, and training opportunities during and beyond the transition. These programs include the GI Bill, tuition and credentials assistance, leadership academies, military occupation-related training, and SkillBridge, which allows transitioning service members to intern with civilian employers during the last 90 to 180 days of their service.11
Reduce disparities in commercial-sector employment opportunities. As noted earlier, the military has effective transition programs aimed at increasing the presence of veterans in the tech space and elsewhere. In one example of a successful transition, a naval flight officer looking for a civilian job emphasized her experiences in combat, as a NATO instructor, and in leading teams. Through the DOD SkillBridge program, she found a role focusing on public sector sales at a tech start-up. Starting as a customer success manager, she was promoted three times to a director-level role at the company, which is now a unicorn.
However, in many cases the digital career tools available to those transitioning to civilian work are inconsistent and often focus on literal job translations, neglecting inputs beyond military occupational specialties, such as rank, education, and formal training. For instance, recruiters from the Army and the Marine Corps receive different career recommendations from a widely used digital tool, the DOD’s Occupational Information Network, or O*NET, which transitioning service members are encouraged to use to evaluate potential careers.
Service members with critical skills, such as cyber-operations specialists and unpiloted-aerial-systems operators, are more likely to leave for commercial opportunities after their first enlistment, while other specialties are less in demand because of a lack of clear occupational analogs. The services could adopt reenlistment incentives that amplify the value of more military experience for skill development, rather than providing potentially ineffective financial incentives for service members so they stay for an additional enlistment.
For instance, promoting the long-term NCO tool kit, with a focus on leadership of personnel and resources, could improve both retention and recruiting outcomes. The services could enhance NCO leadership academies to offer upskilling and additional training, which improve the likelihood of employment in civilian occupations that offer increased earning power.
The military could also promote occupations such as nursing, which has a significant labor shortage, with more than 200,000 openings annually. Veterans with experience as medics are well suited for nursing roles. In addition, the military could offer nursing prerequisites on base as a part of its Installation Education Centers and highlight veterans in diverse nursing careers (in intensive care units, emergency rooms, and flight or transport roles).
In another individual example, an air force aerospace medical technician earned his associate’s degree in nursing while in the service, then used the GI Bill to complete his bachelor’s degree in nursing after leaving the air force. He then went on to earn his MBA and is now a healthcare consultant.
Increase job satisfaction rates. Twenty-two percent of active service members report dissatisfaction with their military experience,12 a percentage that spikes further in certain demographics, such as the 88 percent of female Naval Surface Warfare Officers who leave within their first ten years.
To encourage younger generations to seek out military service as a career, the military can partner with more universities, trade associations, and employers to diversify the service member experience and to allow service members to pursue opportunities outside their specialty while still contributing to the capabilities of their service.
The private sector: Build a talent model around skills
As the United States invests in infrastructure- and climate-related projects, the labor shortage the country is currently experiencing may only grow. And as generative AI and other technologies take off, productivity changes will likely affect the occupations that veterans pursue and the skills that transitioning service members will need to be competitive for employment.
To help expand talent pools, corporate leaders should take note that 60 percent of American workers over the age of 25 don’t hold a four-year degree.13 That roughly matches the percentage of those transitioning out of the military who don’t have a bachelor’s degree.
By moving to a skills-based approach, companies can boost the number and quality of applicants who apply to open positions. Internally, they can build skills and retrain their existing workforces to prepare people for new roles. Retention improves when workers find more opportunities to advance internally, McKinsey research shows.14 Skills-based practices have a greater impact when they’re implemented across the whole talent journey, including in sourcing, hiring, and career development.
Companies can also set targets for veteran recruitment and hiring. One company that has pledged to hire veterans is Micron, which is building a $100 billion semiconductor plant in upstate New York.15 Of the 9,000 people it expects to hire for the plant, Micron is aiming to hire 1,500 veterans, or 17 percent of its workforce. The company has found that veterans are a good fit for the semiconductor industry because of their experience with heavy machinery and technology, along with their disciplined mindset and team-building skills.
In the public sector, US states and local governments that are receiving BIL funding can reserve a portion of jobs for veterans, just as they have for stakeholders such as local construction companies, engineering firms, trade schools, and others.
A hiring strategy that focuses on expanding the pool of potential talent can help communities by creating more and better job opportunities for a broader, diverse pool of workers. It can also provide upward mobility for millions of workers—including veterans—at a crucial time for the US economy.
The military can take more steps to support veterans, particularly enlisted service members, as they navigate the transition to civilian work. Companies can open their hiring practices to consider veterans for a variety of roles, not just those that match perfectly with their military skills. Together, these actions can add billions in value to the US economy as veterans moving into civilian jobs maintain or increase their earning power to support their families and build their communities.